Natural Gas in India's Energy Basket Will Be 20% by 2030
Natural gas usage is growing across the world as supply of crude oil increasingly falls short of demand. Natural gas is not only cheaper, but also cleaner to burn. Although constrained at present, India's consumption of natural gas is predicted to grow fast over the next decade. Being the biggest player, Gail is bound to benefit. The company's chairman & managing director BC Tripathi shared his views with Economic Times.
Where do you see your company 10 years from now? Do you have any vision document and action plan for this period?
As a leading player in the gas sector in India, Gail is well-positioned to play an important role in the fast-growing energy sector in the country. Gail has identified focus areas of growth over the next 10 years and beyond, and has laid down its goals and objectives to become an integrated hydrocarbon major with significant upstream and downstream interests. Gail aspires to be a `100,000+ crore ($19 billion +) company within the next 8-10 years.
Gail has formulated Strategy 2020, wherein strategic initiatives to be pursued in the next 10 years have been identified and an action plan has been rolled out for the same. The primary focus will be on retaining leadership position in natural gas, scouting for international opportunities to import LNG into the country for meeting the burgeoning gas demand, expanding downstream businesses like petrochemicals, diversifying into high-margin downstream businesses in the gas value chain and creating a portfolio of renewable businesses.
What will be the key challenges in achieving these goals?
Indian energy sector is going through a critical phase and is facing several challenges. The industry and the nation at large would need to make choices to address key issues like volatile prices, global linkage of raw material prices, limited domestic availability of gas, LNG market dynamics including availability at affordable prices for Indian market, importance of efficiency across the value chain, alternate energy developments, evolving regulatory frameworks and policy guidelines, downstream market reforms, changing competitive landscape, etc.
Also, globalisation has meant that our energy markets are more and more linked to global markets. The uncertainty caused by such exogenous variables in the oil and gas sector will continue to pose challenges in achieving long-term goals. This will require significant scaling up of capabilities, and doing that in an effective and long-lasting manner will be another key challenge for Gail.
How you plan to tackle such challenges?
For maintaining leadership position in the core business of gas transmission and trading, Gail will strengthen its efforts to procure more LNG through global sourcing and M&As (equity gas). The company will also intensify its market development efforts for enhanced LNG usage in the country.
In addition, Gail will forge partnerships and adopt new business models for entering into new businesses and expanding existing ones. Gail also plans to play a proactive role in shaping regulations and policy guidelines in existing and potential new business areas. To achieve all this, capability building will remain at the core of the company's focus.
What will be the big opportunities for you in the next 10 years?
Indian natural gas sector will offer a range of opportunities in the coming years. The natural gas sector has gone through a number of changes recently that have helped attract investments and catalyse new demand and supply. These include a steady rise in gas prices towards market-based pricing, success in the early NELP rounds that has led to new domestic discoveries, formation of a regulatory body (PNGRB), significant new infrastructure in the form of trunk pipelines, LNG terminals and city gas networks and emerging regulatory changes in downstream consuming sectors such as power, automobile fuels and fertilisers.
As the natural gas market develops, demand is set to rise on the back of segments such as power, CGD and industrial users, necessitating higher imports as well as investment in supporting infrastructure. LNG imports into the country and development of downstream markets to ensure offtake will remain at the core of the natural gas sector in the days to come. Therefore, we believe that the future of the Indian gas market will significantly depend on LNG imports and the opportunity lies in developing infrastructure and the markets for LNG.
How does Gail view the future of energy in general and natural gas in particular when energy resources are becoming more and more expensive?
Population and income growth are the two most powerful forces driving demand for energy. Over the last 20 years, the world population has increased by 1.6 billion people, and it is projected to rise by 1.4 billion over the next 20 years. The world's real income has risen by 87% over the past 20 years and it is likely to rise by 100% over the next 20 years.
We believe that powerful long-term trends continue to shape the modern energy economy — industrialisation, urbanisation and motorisation. In India, energy consumption will also rise due to its population growth and fast-growing economy. However, inadequate energy addition on the supply-side may widen the already existing demand-supply gap over the coming years.
It is expected that fossil fuels will continue to be the mainstay of India's supply basket in the short to medium-term scenario. Natural gas currently accounts for about 10 % of India's energy basket and it is expected to reach 20% by 2030. India could become the second-largest natural gas consumer in Asia by 2015. In the long term, with decisive climate-change policies, technological improvements in clean fuel technologies, and constrained fossil fuel supplies, the share of renewable energy will gradually increase.
How do you see the competitive scenario playing out over the next decade in your key business segments?
A number of attractive growth opportunities are emerging in the Indian energy sector and there are also many new players to take advantage of those opportunities. The formation of a regulatory body (PNGRB) in the natural gas sector has brought in a new dimension to the competitive landscape. New players are aggressively entering the natural gas sector, be it the transmission segment or city gas distribution.
The competition is likely to intensify in the coming years not only in the midstream areas, but also in the downstream. Reforms in the downstream segments of the value chain and emergence of market-based pricing are encouraging players to enter into sectors like CGD, power, etc. With LNG imports growing there is a need to expand LNG import infrastructure, and this is attracting many companies to set up LNG regasification terminals.
How is Gail planning for long-term corporate sustainability?
Gail, as a leading company in the gas sector and also as a responsible corporate citizen, has started its journey towards sustainable development. Gail's principal business is transmission and marketing of natural gas to various industries including fertiliser, power, refineries, sponge iron, city gas/CNG, and others. Natural gas is a cleaner fuel compared to coal and other liquid fuels and hence its usage helps user industries to reduce their pollution levels.
Gail is progressively creating a portfolio of renewable businesses (solar, wind, etc.) in order to play an important role in growing the share of cleaner energy in the overall energy mix. Besides, Gail is taking up several other initiatives to promote sustainable development and these include 'Global Methane Initiative', 'Green House Gas Accounting Report to Measure, Manage & Mitigate GHG emissions', construction of future buildings as green buildings, and so on.
The company is also coming up with its first Sustainability Report based on GRI G3 Guidelines for the financial year 2010-11 to efficiently disseminate information on various measures taken by the company on social, economic and environmental fronts. This report shall also help Gail to align its sustainable development efforts to maximise value for various stakeholders.
A core team has been formed exclusively for sustainability reporting and sustainability coordinators have been appointed at all sites. Several awareness workshops have been conducted across the company to increase employee awareness about sustainability. Gail is also formulating its sustainability policy. It will strive towards energy security of the country while maintaining equilibrium with the environment in order to achieve sustainable development.